Overview of capital markets
Analytical review of the market
In September, the exchanges again was rough. Stock markets, oil, gold, currencies were under the influence of extraordinary geopolitical events, so the upward movement quickly gave way to rapid decline.
Overview stock markets in the US
The uncertainty of the protracted U.S.-China tariff wars again brought instability and fears that the measures applied by countries to mutual pressure, hinder economic development and the growth of corporate benefits. The negotiating group will meet again in Washington in October to settle a dispute about Commerce and technology that threatens to lead the world economy into recession. In anticipation of both parties have made “conciliatory” steps toward each other. Chinese importers signed contracts for the purchase of American soybeans and pork. The administration of the tramp was postponed, scheduled for 1 October, another increase in tariffs on Chinese imports until October 15.
The fed’s decision on interest rates
For American investors, the most anticipated event was the decision of the fed to lower interest rates. President trump openly pressured the head of the Central Bank, which by itself is an unprecedented fact. The rate was lowered by 25 basis points from 2.25% to 2.00%. In his speech at the press conference the head of the fed Jerome Powell said the decision was made on the basis of objective analysis of the current situation. He confirmed that the U.S. economy remains strong in the first half of the growth was 2.5%.
Unemployment is around half a century for at least a year and a half.
Stable incomes and consumer confidence are key factors of successful development.
The weakening observed in the field of investment and exports, amid falling production volumes.
The main reasons the official believes the worsening prospects for global growth and China.
In addition, there are other geopolitical risks, such as Brexit, which remain unresolved.
Shopping opposition is putting pressure on U.S. business and deters investors. In the second quarter recorded a moderate decrease in fixed capital investment. Remains below the target 2% is inflation. Over the 12 months to July, total PCE inflation was 1.4% and the core index, which excludes food and energy, was 1.6 %. The fed still expects to achieve the target level by 2021. However, inflationary pressures remain muted, and rates of long-term inflation expectations are on the lower level of their historical ranges. The weakness of global growth and wage war, creating constant risks. These factors, combined with subdued inflationary pressures forced the members of the HIF to change the view of monetary policy. As noted by Powell, the fed plays no role in the formulation of trade policy, but takes into consideration everything that can have a significant impact on the U.S. economy. The future course of monetary policy needs to consider economic prospects and risks.
The September Non Farm Payrolls recorded an increase in total employment in August of 130,000 jobs. Employment growth averaged 158.000 (revised 156.000) per month this year, which is below the average of 223.000 in the previous year. The consumer price index published by the Bureau of labor statistics, declined from 1.8% to 1.7% yoy and was below the forecast of 1.8%. Core inflation (excluding food and energy) was 2.4%, above expectations of 2.3% and a previous figure of 2.2%. The us economy in the second quarter grew at a modest pace of 2% yoy, significantly slower than in the beginning of the year – in the first quarter, GDP grew by 3.1%.
GDP data for the Department of Economic Analysis, USA[/caption] the Index of economic optimism and business activity ISM in the manufacturing sector dipped significantly 50.8 per cent compared with 55.1% and 49.1% vs 50,0%, respectively. PMI Markit manufacturing sector PMI at 50.3% slightly exceeded the expectations of 49.9%. The U.S. Department of Commerce announced that in August, consumer spending rose 0.1%, the lowest result in six months, despite a steady increase in income.
The economy of China is under heavy pressure from the tariff of confrontation with the United States. More than a year last the history of “mood swings”. Hope for a favorable outcome of the work of the negotiating group are replaced by a new round of escalation. Quotes of the largest Chinese companies collapsed after several media reported about a possible delisting of Chinese companies on U.S. exchanges. The price of the Alibaba Group over the last 5 trading days of the month fell by 9.06%, JD.com – by 10.08%, Pinduoduo – 8.2% Baidu Inc – by 3.76%.
Asian markets reacted negatively to the news. The Shanghai Composite fell 27 points, or 0.9%, to 2905; Nikkei 225 was down 123 points, or 0.6% to 21756. China’s economy is growing at the lowest pace since 1992. Weak manufacturing activity increases pressure on Chinese leaders to defend their negotiating positions. Despite the fact that business confidence is showing signs of stabilization, experts warn that the economic activity of China in the long run may decrease.
According to Rosstat, industrial production growth in the first half of 2019 was 2.6% compared to the same period of 2018. In August, industrial production grew by 2.9% compared to 2.5% of Aug 2018. Positive dynamics was observed in all sectors. The greatest rate of growth commodity and manufacturing sectors.
Macroeconomic indicators of the Central Bank of Russia lowered the key rate by 25 basis points to 7%. The Central Bank cut the GDP growth forecast for the current year to 0.8 to 1.3% from 1.0-1.5% and revised the annual inflation forecast downward to 4.0 to 4.5% from 4.2 to 4.7%. The share of investment in fixed capital in the first quarter remained at the level of 15.7%. Consumer prices in August compared to July decreased by 0.2% with growth of 2.4% from the beginning of 2019. The unemployment rate dropped to 4.3% from 4.5% and market expectations of 4.4%.
The Russian stock market Investors closely watched the situation on world markets. The September survey of Russian securities reflects a fairly stable moderate growth since the beginning of the month. Marks the peak the market reached in the middle of the month on the background of panic rise in oil prices due to the explosions at the refinery in Saudi Arabia. The second half of September, the Russian indexes decreased with the oil quotes and pressure of the uncertainty in global markets. Index Mosberg a month gained 0.4 percent. The maximum value reached 17 Sep 2847,01 points. The RTS index since the beginning of the month increased by 3.1%, reaching a maximum 1399,36 September 17.
Indexes of the Moscow exchange – MOEX, RTSI, correlation with oil prices.
The growth leaders were Bank VTB +9,56%, Mechel +5,27, inter RAO UES +3,87%. Among the outsiders – M. Video -8,78%, MMK -6,91%, JSC Tatneft -6,85%, Yandex -6,55%.
Analytical review of the market
The major stock market indices They ended the month slightly. The S&P 500 index added 1.37 percent and finished the last session at around 2976,74. Industrial Dow Jones has grown by 1.38% and closed at 26916,83. Nasdaq add on 0,68% and ended the month on 7749,45. The first half of the month looked very optimistic, but the fall of the last two weeks have blocked all previous positive. The second half of the month wall street lost to the bears. In conclusion, indexes dropped to three-week lows.
S&P 500, DJ30, Nasdaq[/caption] the Most serious loss was suffered by the Nasdaq, which sank by 2.2% and the Russell 2000 – minus 2.5%.
Nasdaq, Russel 2000
The technology sector He was most sensitive to changes in the tone of a trade dispute. After reports that the administration trump is considering measures to limit, up to a total ban, investment in China, began a massive sale of shares. The most significant losses in the composition of the Nasdaq occurred in securities Intuit Inc. (INTU), which fell over the month by more than 7%. Shares of the largest software developer Adobe Systems Inc (ADBE) fell by 4.11%. Chip maker Micron Technology have joined the ranks of the record, the drop in the capitalization of the company amounted to 12.2% in response to weak benefit forecast and sales. To Facebook stock this week was the worst in 2019. The paper fell 6.8% amid reports in the media about anti-trust investigation by the Federal trade Commission against the company.
Financial sector make It look more optimistic. Paper largest banks JPM +7,75%, WFC +9,20%, BAC +6,73% looked better than other sectors. Manufacturer of semiconductor products, Intel Corp (INTC) increased more than 8% capitalization. Shares of AAPL rose more than 7% in response to the release of new iPhone models.
The bond market is the Unstable situation in the markets leads to increased demand for less risky assets. The yield on 10-year Treasury bonds fell to TMUBMUSD10Y 1,632%, the yield of 30-year bonds TMUBMUSD30Y fell to 2,093%. The conflict with China caused damage to key business sectors such as manufacturing, agriculture represents a threat to the longest economic expansion since the Second world war, consumer confidence is at a three-month minimum. To these factors added the news about the impeachment. All this has resulted in a new bullish momentum in the bond market.
The market of crude oil in September was influenced by:
The OPEC decision regarding the extension of the agreement about the reduction of production for the 9 months to March 2020;
The attack on 14 September on the largest oil refineries in Saudi Arabia between Abqaiq, which reduced oil production by half to 5 million barrels. per day with total production of 9.8 million barrels., approximately 5% of the total world production;
A sharp drop in production of Iranian and Venezuelan oil because of US sanctions;
The recent strengthening of the dollar to 2-year high;
Tensions in world trade, which could trigger a global recession and reduced energy demand;
The growth of oil production in the United States to a record high level of 12.5 million barrels per day.
The November oil futures WTI Crude Oil Nov ’19 (CLX19) eventually added for the month of 0.46%. September auction started at $54,76 per barrel, the last day of the month contract is trading at $55,18. Maximum marks quotes reached on 16 September, when the price of crude oil soared to $63.89 a barrel. December futures for Brent Crude Oil Brent F Dec ’19 (QAZ19) for the month rose 3.3% from $57,91 per bar. up to $of 60.33 per barrel., fixing a maximum of 16 of September of $68,32 per barrel.
Brent Crude Oil F Dec 19
Read more about futures trading can be found in our article.
The factor of geopolitical tension contributes to the growth of quotations of precious metals. The actions of world Central banks to mitigate the monetary policy and strengthening of incentive measures, low global inflation, trade wars, Brexit and global geopolitical risks associated with Iran, North Korea and Venezuela increase the demand for asset shelter. In early September gold December futures Gold Dec ’19 (GCZ19) is trading near its historical highs above 1550 dollars per ounce. Then followed a pullback below psychological mark of $ 1,500. The month ends at the level of 1489,9 dollars per ounce.
Gold, oil S&P500
Before negotiations the U.S.-China working group, the investors took a wait and see position and will listen carefully to the slightest nuances in the rhetoric of the major parties. Traders take long positions using statistical data, economic and corporate news. If You want to learn all the intricacies of stock trading – is go our free course “the Formula for breakeven trading